Problem Set 6 Solutions

Due: April 2, 2015 Economics 1030

Problem 1 (Buying a rm): Consider a generalized version of the buying

a rm problem:

The value, v, of company to Tomasz is distributed uniformly over the

 range [v, v ]

Tomasz knows its true value.

You dont know true value but company is worth  times more to you

 than it is to Tomasz. (You should assume that   1.)

You make a take-it-or-leave-it oer to Tomasz, which Tomasz accepts

 if and only if your oer is greater than or equal to his valuation.

You are risk neutral.

a. Assume that [v, v ] [0, 100]. Derive the function that maps to the

 optimal level of your bid. In other...